Broadcaster lost big match with Sky over failure to entice viewers

SETANTA’S attempt to throw down the gauntlet to BSkyB and muscle in on Premier League football was always a risky move.

But the downfall of the firm – founded almost 20 years ago to show Irish sport to ex-pats – eventually came down to a simple numbers game.

It overpaid for a host of television rights at the top of the market, and ran out of money when it failed to attract enough subscribers and advertising suffered in a bleak economic climate.

Setanta’s precocious push into the big league came in 2006, when it was the first company to break BSkyB’s stranglehold on English Premier League soccer.

It won the right to show 46 matches, although it lost one package of 23 matches back to BSkyB in February.

But the broadcaster has stumbled after failing to reach the estimated 1.9 million subscribers it needed to break even.

It bid £392 million (€460m) to the Premier League to broadcast 46 games a season from 2007 to 2010 and a further £159m for 23 games a year from 2010 to 2013.

A £150m deal with the Football Association for England and FA Cup games added to the bill, as well as an initial £125m agreement with the Scottish Premier League.

Then recession hit impacting advertising revenues and putting pressure on its subscriber base.

Experts believe Setanta’s main problem was an underestimation of the levels of subscriptions it would need to meet its costs.

Toby Syfret of Enders Analysis said the firm had overpaid for some of its deals contributing to rights inflation for some sports and hugely increasing their outgoings.

“I don’t think they ever did a proper demand analysis,” he said. “I think they may have dreamt of rivalling Sky, but I think their first dream was ‘we can carve a niche for ourselves’. You have to play a complementary role, know your limits.”

The company, which is backed by Balderton Capital, Doughty Hanson and Goldman Sachs, is thought to have been losing around €115m a year.

The English Football Association is said to have rebuffed the attempts by Setanta to reduce its £150m share of a £425m four-year deal by 25%.

Rival broadcasters have seized on Setanta’s failure as an example of BSkyB’s domination of the pay-TV market.

Virgin Media chief executive Neil Berkett said: “Setanta’s difficulties are the symptom of a failed market. Ofcom [the regulator] has already acknowledged that there are significant issues to be addressed and they now need to act swiftly to prevent further harm to consumers.”

Sean Williams, from BT, added that Setanta’s failure “throws into stark relief” a market failure in pay TV.

“Competition in pay TV in the UK is not working effectively.

This gives rise to significant harm to consumers in the form of higher prices, restricted choice and diminished innovation.”

But with ESPN, backed by the Disney group, now taking on Setanta’s Premier League rights, this situation could change.